Dividend grossing up and tax credit apply only to registered shareholders, not to a share purchaser receiving equivalent amounts.

Grossing up and tax credit on dividends under the Income-tax Act, 1922 were confined to dividends paid by the company to its registered shareholder. A purchaser of shares who was not entered in the company's books as a shareholder could not claim those statutory benefits merely because the amount received from the vendor shareholder corresponded to a dividend. The court treated the certificate question under section 20 as unnecessary once the assessee failed on entitlement to the substantive relief. The claim under sections 16(2) and 18(5) was therefore rejected.

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Issues: Whether the assessee, who had purchased shares but was not registered in the company's books as shareholder, could claim the benefit of grossing up and tax credit in respect of dividends under section 16(2) and section 18(5) of the Income-tax Act, 1922.

Analysis: The right to have dividend grossed up under section 16(2) and to obtain credit for tax under section 18(5) arises only where the dividend is paid by the company to its registered shareholder. An amount received by a purchaser from the vendor shareholder, even though equivalent to dividend, is not a dividend paid by the company to the purchaser. Section 18(5) also makes it clear that the statutory benefit is confined to the shareholder. The further question whether other evidence could replace the certificate under section 20 was treated as unnecessary once the assessee was found not to be entitled to the substantive benefit of those provisions.

Conclusion: The assessee was not entitled to invoke section 16(2) or section 18(5) in respect of the amount received, and the claim was answered against the assessee.

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